Monday, August 22, 2011

Northern District of Georgia via Judge Story rules for MERS in Two Cases

The United States District Court for the Northern District of Georgia, continuing its rather schizophrenic decisions concerning the Mortgage Electronic Registration Systems, Inc. (“MERS”) has issued two (2) orders upholding MERS' assignment, foreclosure and dismissed wrongful foreclosure claims.

In Bridgette Roxanne Jackman, Plaintiff v. Philip A. Hasty, et al. Defendants, the United States District Court for the Northern District of Georgia Atlanta Division Civil Action File No. 1:10-CV-2485-RWS (decided on March 8, 2011) the Federal Court held against the Plaintiff on wrongful foreclosure claims and (fundamentally) decided that assignments and foreclosures by MERS, whether conducted by MERS or LaSalle Bank the final assignee, were proper under Georgia law.The Federal Court applying Georgia law, Gordon v. South Centennial Farm Credit, ACA, 213 Ga. App. 816, 446 2.E.2d 514, 515 (1994), found that the Security Deed was appropriate, was properly assigned through MERS to La Salle and that the Plaintiff had no claim (once the Court found that the Plaintiff was in default).The Court applied a previously decided case of Nicholson v. One West Bank, United States District Court Northern District of Georgia Civil Action File No. 1:10-CV-1795-JEC/AJB as, somewhat, controlling on another district Court sitting in the same division.Additionally in Jackman, the Federal Court went on to dismiss claims associated with wrongful foreclosure, the Fair Debt Collection Practices Act, fraud, Georgia's Uniform Deceptive Trade Practices Act and the Georgia Fair Business Practices Act.The Court also dismissed a slander of title action filed by the Plaintiff in that she could not show any special damages associated with the alleged publication (slander).See, Latson v. Boaz, 278 Ga. 113, 598 S.E.2d 485, 487 (2004).

The Plaintiff only survived the Motion to Dismiss on the novel theory (possibly undecided in the 11th Circuit) on the issue of splitting the Note from the Security Deed.Perhaps further cases will illuminate us on this issue.

The Jackman case is listed below and on Docstoc. [1]

In Lacosta v. McCalla Raymer, LLC, the United States District Court for the Northern District of Georgia – Atlanta Division, Civil Action File No. 1:10-CV-1171-RWS decided on January 18, 2011, the Federal Court dismissed challenges to ownership and assignment by MERS to BAC Home Loans ("BAC").While a different Plaintiff and different lender were involved, the United States District Court ruled (even though it was two months prior to Jackman) in the same manner as issued in the opinion in Jackman.However, in Lacosta, Judge Story found that it was not improper to split the Note from the Security Deed and proceed with foreclosure.He relies specifically on language in that Security Deed.Perhaps, that is the difference between the non-grant of dismissal on the split of the Note from the Security Deed in Jackman as opposed to the complete dismissal in Lacosta.However, this author finds the rationale stated in the Lacosta case was simply omitted in the Jackman case.Therefore, it is difficult to draw any conclusion on the splitting of the Note from the Security Deed from the Lacosta case.

The Lacosta opinion is listed below. [2]

These cases, contrasted with the ones decided by by Judge Amy Totenberg, continue to leave attorneys with a somewhat schizophrenic outcome on wrongful foreclosure cases in the United States District Court for the Northern District of Georgia.Perhaps the 11th Circuit will sort out this confusion.

the Law Firm Defendants [19], and Plaintiff’s Motion for Order [23]. Having considered the record, the Court issues the following Order.

Background

This case arises out of a mortgage loan transaction between Plaintiff and Mortgage It, Inc. (“MII”), in which she purchased property located at 1351 Greenridge Trail, Lithonia, GA 30058 (the “Property”) (the “Loan”). (Dkt. [1- 9] at ¶ 15). In consideration for the Loan, Plaintiff executed a note (the “Note” (Dkt. [1-6] at 3-6)) in favor of MII in the amount of $640,000.00 and encumbered the Property with a security deed (the “Security Deed” (Dkt. [1-2] at 5-8)) in favor of MERS, as nominee for MII. The Note and Security Deed were thereafter purportedly assigned to LaSalle Bank National Association (“LaSalle”), as Trustee for Morgan Stanley Loan Trust, 2006-1AR (the “Lender”) (the “Assignment”). (Dkt. [1-7] at 4-6).

The Loan went into default and the Lender began foreclosure proceedings, utilizing the Law Firm Defendants to conduct the foreclosure sale of the Property. (Dkt. [1-4]). Following the foreclosure sale, a dispossessory action was commenced against Plaintiff. (Dkt. [1-7] at 7). Thereafter, on June 28, 2010, Plaintiff filed this action. Plaintiff seeks injunctive relief to stay her eviction from the Property (Count III). Plaintiff also seeks compensatory and

Plaintiff asks the Court to grant Plaintiff “a ‘Waiver of Service’ in serving Defendant SWERTFEGER AND SCOTT, PC., d/b/a, Shapiro & Swertfeger LLP. ” Since the Court has no such authority, Plaintiff’s Motion for Waiver of Service [3] is DENIED.

II. Plaintiff’s Motion for TRO [2]

Plaintiff seeks “a temporary injunction to set aside the foreclosure sale, and to stop the Dispossessory proceedings . . . . ” (Dkt. [1-10] at ¶ 71). Federal Rule of Civil Procedure 65(c) states: “The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” Plaintiff does not deny that she has failed to make payments in accordance with

the Note she signed and has made no offer to tender any security. Plaintiff’s Motion for Temporary Restraining Order [2] is DENIED. Count III of Plaintiff’s Complaint seeking injunctive relief is DISMISSED.

Additionally, on April 21, 2009, LaSalle filed a dispossessory warrant against Plaintiff in DeKalb County State court. Jackman v. LaSalle Bank, N.A., 683 S.E.2d 925, 926, 299 Ga. App. 894 (Ga. Ct. App. 2009). Following a trial on the merits, the trial court issued a writ of dispossession for May 20, 2009.

Id. at 927. Plaintiff appealed the trial court’s order asserting that the foreclosure sale was wrongful and that, because she had filed an action for “fraudulent foreclosure” the dispossessory action could not proceed. Id. The Court of Appeals of Georgia held that “the alleged invalidity of a foreclosure sale cannot be asserted as a defense in a subsequent dispossessory proceeding.” Id.2 This

2 The Georgia Court of Appeals noted:

The purchaser at a foreclosure sale under a power of sale in a security deed is the sole owner of the property until and unless the sale is set aside. It is not germane to a dispossessory proceeding to allege that a contract under which the plaintiff claims to derive title from the defendant is void and should be canceled. If the sale of the premises under the power of sale in the loan deed was void on account of its improper exercise, or because the loan was not mature, this [can]not be set up as a defense to a dispossessory proceeding under ... OCGA §§ 44-7-50; 44-7-53.

Jackman, 683 S.E.2d at 927 (emphasis in original)(citation omitted).

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Court will not provide Plaintiff with relief she has already been denied by two Georgia courts.

III. Motions to Dismiss

A.Standard for Motion to Dismiss

Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” While this pleading standard does not require “detailed factual allegations,” “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do. ” Ashcroft v. Iqbal, 556 U.S. ----, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). In order to withstand a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly, 550 U.S. at 570). A complaint is plausible on its face when the plaintiff pleads factual content necessary for the court to draw the reasonable inference that the defendant is liable for the conduct alleged. Id.

At the motion to dismiss stage, “all-well pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff.” Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273

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n.1 (11th Cir. 1999). However, the same does not apply to legal conclusions set forth in the complaint. Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009) (citing Iqbal, 129 S. Ct. at 1949). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 129 S. Ct. at 1949. The court does not need to “accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555.

B.Sufficiency of Plaintiff’s Complaint

As an initial matter, it is not clear to the Court that there has been a proper assignment of the Security Deed or Note from MERS to LaSalle, such that LaSalle had any authority to foreclose upon the Property. The document entitled Corporate Assignment (the “Assignment” (Dkt. [9-1] at 45)), purports to transfer the Security Deed from MERS to LaSalle. After describing the desired transfer of interest, the Assignment states: “IN WITNESS WHEREOF, the undersigned [(MERS)] has caused this instrument to be executed by its duly authorized corporate officers . . . . ” Signing on behalf of MERS as its Assistant Vice President is Philip A. Hasty, and attesting to the signature is Kathy Krueger, listed as MERS Assistant Secretary. As alleged by the Complaint and confirmed by Hasty and Krueger in their Motion to Dismiss [10], they are employees of Shapiro & Swertfeger, LLP, the law firm hired by the Lender to

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conduct the foreclosure sale of the property. (Dkt. [10-1] at 2-3). The Law Firm Defendants, including Hasty and Krueger, do not allege in their Motion to Dismiss or in their Reply in Support of the Motion to Dismiss [21] that they were ever employees of MERS. Therefore, it is not clear that the Security Deed was properly transferred to LaSalle, such that it had authority to foreclose upon the Property.

i.Wrongful Foreclosure.

Prior to the portion of her Amended Complaint delineated “Counts,” Plaintiff’s Complaint contains a section entitled “Cause of Actions Common to All Counts.” (Dkt. [1-9] at 5). Plaintiff alleges that the proposed foreclosure sale of the Property is unlawful because: (1) the foreclosure notice does not comply with O.C.G.A. § 44-14-162.2; (2) ASC or its counsel have not been assigned the Note and the holder of the Note is unknown and not properly identified; (3) the note and the security deed have been “split” therefore ASC is without legal standing to foreclose upon the property (Dkt. [2] at 2); and (4) the Law Firm Defendants failed to comply with her requests for documents and information.

Under Georgia law, “[i]t is clear that a security deed which includes a power of sale is a contract and its provisions are controlling as to the rights of

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the parties thereto and their privies.” Gordon v. S. Cent. Farm Credit, ACA, 213 Ga. App. 816, 446 S.E.2d 514, 515 (Ga. Ct. App. 1994). Plaintiff granted and conveyed to MERS the Property with power of sale. (Dkt. [9-1 ] at 19). The Deed Plaintiff granted to MERS states that “if necessary to comply with law or custom, MERS . . . has the right to exercise any or all of [the interests granted to MERS by the Borrower], including but not limited to, the right to foreclose and sell the Property . . . . ” (Id. at 3). Plaintiff unequivocally granted MERS the power to sell the Property if she were not able to comply with the terms of the Note. Plaintiff does not contest her failure to comply with the terms of the Note. However, the foreclosure sale was not brought by MERS or an agent acting on its behalf, but rather by LaSalle pursuant to the Assignment. As noted above, it is not evident that the assignment was properly executed and therefore the Court cannot say that as a matter of law, LaSalle had any authority to foreclose upon the Property.

If the Assignment was not proper, then the notice of sale given to Plaintiff was also improper. O.C.G.A. § 44-14-162.2 (“Section 162.2”) states that

“[n]otice of the initiation of proceedings to exercise a power of sale in a mortgage, security deed, or other lien contract shall be given to the debtor by the secured creditor . . . . [and] shall include the

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name, address, and telephone number of the individual or entity who shall have full authority to negotiate, amend, and modify all terms of the mortgage with the debtor . . . .”3

The notice provided to Plaintiff identifies ASC as the entity with the authority to negotiate the Loan. However, if LaSalle is not in lawful possession of the Note or Deed, then ASC, its loan servicer, has no legal authority to negotiate the Loan.

The assignment of the Security Deed from MERS to LaSalle was filed in the DeKalb County Superior Court on June 24, 2008, before the foreclosure sale on February 3, 2009. (Dkt. [9-1] at 45). However, if the security deed filed with the DeKalb County Superior Court is invalid, then Defendants have likely violated O.C.G.A. § 44-16-162(b) as well. That statute requires that “[t]he

3 O.C.G.A. § 44-14-162.2(a) in its entirety states:

Notice of the initiation of proceedings to exercise a power of sale in a mortgage, security deed, or other lien contract shall be given to the debtor by the secured creditor no later than 30 days before the date of the proposed foreclosure. Such notice shall be in writing, shall include the name, address, and telephone number of the individual or entity who shall have full authority to negotiate, amend, and modify all terms of the mortgage with the debtor, and shall be sent by registered or certified mail or statutory overnight delivery, return receipt requested, to the property address or to such other address as the debtor may designate by written notice to the secured creditor. The notice required by this Code section shall be deemed given on the official postmark day or day on which it is received for delivery by a commercial delivery firm. Nothing in this subsection shall be construed to require a secured creditor to negotiate, amend, or modify the terms of a mortgage instrument.

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security instrument or assignment thereof vesting the secured creditor with title to the security instrument shall be filed prior to the time of sale in the office of the clerk of the superior court of the county in which the real property is located.” O.C.G.A. § 44-16-162(b).

ASC may be without legal standing to foreclose upon the property, but it is not because the Note and Security Deed have been “split.” Plaintiff argues that since MERS only possessed the Deed, the Deed is all it could transfer to LaSalle, and because LaSalle did not also possess the Note, it could not foreclose on the Property. Magistrate Judge Alan J. Baverman rejected this argument in a Report and Recommendation adopted by Judge Julie E. Carnes. See Nicholson v. OneWest Bank, No. 1: 1 0-cv-0795-JEC/AJB, 2010 WL 2732325, at *4 (N.D. Ga. April 20, 2010) (“[T]he nominee of the lender has the ability to foreclose on a debtor’s property even if such nominee does not have a beneficial interest in the note secured by the mortgage.”). Plaintiff has failed to draw the Court’s attention to any Georgia statute or decision interpreting Georgia law that precludes the holder of the security deed from proceeding with a foreclosure sale simply because it does not also possess the promissory note.

Plaintiff’s argument is also foreclosed by the plain language of the Deed she granted to MERS. The plain language of the Deed granted by Plaintiff to

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MERS recognizes that the Note is held by the “Lender,” but nonetheless expressly grants MERS and its assigns “the right to foreclose and sell the Property.” (Dkt. [9-1] at 19). The deed discloses no intent on the part of Plaintiff to restrict MERS or its assigns from selling the property if the Note and Deed were not in the possession of the same entity.

While Plaintiff’s theory based upon the “splitting” of the Note and Deed is not valid, the Court cannot say that she has failed as a matter of law to state a claim for other violations of Georgia’s foreclosure statutes. Therefore, both the Law Firm Defendants and Lender Defendants Motions to Dismiss [9, 10] are

DENIED as to these claims.

Finally, Plaintiff appears to contend in this section of her Complaint that the Law Firm Defendants failed to comply with her requests for documents and information. To the extent Plaintiff contends that the Law Firm Defendants failed to respond to a Qualified Written Request pursuant to the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601, et seq., such a claim fails because RESPA does not provide for such a claim against foreclosure counsel or its employees. To the extent that she alleges these claims against the Lender Defendants, those claims are barred by res judicata as this same claim was dismissed with prejudice by the Superior Court of DeKalb County,

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Georgia, in an earlier action. (Dkt. [9-1] at 12).4 To the extent Plaintiff seeks to allege any RESPA claims, those claims are DISMISSED.

ii.Count I - Fair Debt Collection Practices Act

The FDCPA

regulates the practices of “debt collectors,” a term that is defined as excluding repossessors and other enforcers of security interests, 15 U.S.C. § 1692a(6), except that a repossessor may not take or threaten to take nonjudicial action to dispossess a person of property if ‘there is no present right to possession of the property claimed as collateral through an enforceable security interest.’ § 1691 f(6)(A).

Nadalin v. Auto. Recovery Bureau, Inc., 169 F.3d 1084, 1085 (7th Cir. 1999). “[A]lthough a mortgage servicer is not a ‘debt collector’ under the FDCPA’s general definition of the term . . . [a mortgage servicer] qualifies as a ‘debt collector’ for purposes of § 1692f(6). ” Selby v. Bank of Am., Inc., No. 09-cv- 2079-BTM, 2010 WL 4347629, at *2 (S.D. Cal. Oct. 27, 2010). Therefore, if ASC and the Law Firm Defendants did not have a present right to possession of the Property, their action to effect dispossession of the property constitutes the

4 The copy of the order from the Superior Court does not indicate what causes of action were alleged by Plaintiff in that action, but Plaintiff in her response to the Lender Defendants’ Motion to Dismiss does not argue that claims relating to any qualified written requests are not foreclosed, but rather, that this action differs from the previous one because it is based upon FDCPA claims. (Dkt. [ 16] at ¶ 21).

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use of “unfair or unconscionable means to collect or attempt to collect [a] debt,” and is a violation of the FDCPA. 15 U.S.C. § 1692f(6).

Plaintiff also appears to allege that the Law Firm Defendants violated Section 1692g of the FDCPA, concerning the validation of debts. To the extent that Plaintiff made a valid request for a validation of her debt, it appears that the Law Firm Defendants complied with the requirements of 15 U.S.C. § 1692g(b), and such claim is DISMISSED. Finally, Plaintiff alleges that her loan number was changed by the Lender Defendants, but does not allege how such a change constitutes a violation of the FDCPA, and therefore that claim is DISMISSED. Defendants’ Motions to Dismiss [9, 10] in regards to Plaintiff’s FDCPA claims are GRANTED in part and DENIED in part.

iii.Count II

a.Fraud

Plaintiff makes several allegations that Defendants acted fraudulently. Plaintiff asserts that Defendants, without her authorization, “created, a new Note with a new loan number, bearing Plaintiff’s Name and property.” (Dkt. [1-9] at ¶ 43). There is no indication that Defendants created a new note and this allegation without more is insufficient to assert a claim. Plaintiff asserts that she has “reasons to believe[] that the Defendants also made false statements

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by misrepresenting the actual date that the [Assignment] was signed,” but does not allege what reasons she has to believe the date is false. (Dkt. [1-10] at ¶ 48). This allegation is also insufficient. With the particularity necessary in alleging fraud, Plaintiff has stated that Hasty and Krueger signed the Assignment as officers of MERS, when neither were employees of MERS. This allegation identifies a particular document, identifies a particular misstatement within that document, and is supported by additional factual allegations. However, this alone is not sufficient to assert a claim for fraud.

To state a claim for fraud under Geogia law, a plaintiff must plead five essential elements:

(1) That the defendant made the representations; (2) that at the time he knew they were false; (3) that he made them with the intention and purpose of deceiving the plaintiff; (4) that the plaintiff relied on the representations; [and] (5) that the plaintiff sustained the alleged loss and damage as the proximate result of their having been made.

Estate of Shannon v. Ahmed, 696 S.E.2d 408, 410, 304 Ga. App. 380 (Ga. Ct. App. 2010) (citation omitted). Assuming Plaintiff can prove the first three elements, Plaintiff has not alleged that she relied upon the purportedly false signatures of Hasty and Krueger to her detriment. Therefore, Plaintiff’s claim for fraud is DIMISSED.

Plaintiff attempts to assert claims under the Uniform Deceptive Trade Practices Act (“UDTPA”), O.C.G.A. § 10-1-370, et seq., and the Fair Business Practices Act (“FBPA”), O.C.G.A. § 10-1-390, et seq. However, both statutes do not apply to conduct subject to rules and regulations promulgated by a regulatory agency of Georgia or the United States. O.C.G.A. § 10-1-374(a)(1); O.C.G.A. § 10-1-396(1). Because the servicing of mortgages and foreclosure sales are regulated by other state and federal rules and statutes, claims relating to either are exempt from the UDTPA and FBPA. Therefore, Plaintiff’s claims for violation fo the UDTPA and FBPA are DISMISSED.

iv.Count V - Slander of Title

“The owner of any estate in lands may bring an action for libelous or slanderous words which falsely and maliciously impugn his title if any damage accrues to him therefrom.” O.C.G.A. § 51-9-11. “In order to sustain an action of this kind, the plaintiff must allege and prove the uttering and publishing of the slanderous words; that they were false; that they were malicious; that he sustained special damage thereby; and that he possessed an estate in the property slandered.” Latson v. Boaz, 598 S.E.2d 485, 487, 278 Ga. 113 (Ga.

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2004) (citation omitted). Plaintiff has not alleged that she sustained any special damages and therefore fails to allege an essential element of the cause of action. Plaintiff’s claim for Slander of Title is DISMISSED.

v.Count VI - Suit to Quiet Title.

Plaintiff asserts that “due to the bifurcation of the security deed and the promissory note, [she] is the sole and exclusive owner of the [P]roperty . . . .” As noted above, this “splitting” of the note and deed theory is meritless. Count VI of Plaintiff’s Complaint is DISMISSED.

vi. Claims against MERS and S&S

The Lender Defendants allege that Plaintiff has failed to properly serve Defendant MERS, and therefore the Court lacks personal jurisdiction over MERS. (Dkt. [9-1] at 10). Plaintiff, in her Response to the Lender Defendants’ Motion to Dismiss [ 16], asserts that MERS was served, and that she has attached signed returned receipts of service. (Dkt. [16] at 7). However, no such proof of service is attached to Plaintiff’s Response [16]. Attached to Plaintiff’s Response to the Law Firm Defendants’ Motion to Dismiss [18] is a notarized “Affidavit of Service” indicating that Plaintiff mailed the summons, original complaint, amended complaint, and exhibits A-T to MERS via certified mail. (Dkt. [18] at 16). Also attached, is a confirmation of delivery to MERS. The

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Lender Defendants’ Motion to Dismiss [9] as to MERS, because of lack of service, is DENIED without prejudice. The Lender Defendants may re-file the Motion on this ground, if after examining Plaintiff’s Affidavit of Service, they still deem service upon MERS to be improper.

While addressed in other filings, the Law Firm Defendants do not raise insufficient service of process as to S&S in their Motion to Dismiss [10] and therefore that defense is waived. See Fed. R. Civ. P. 12(h)(1) (defense of insufficient service of process is waived if not raised in motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6)).

For the reasons stated above, the Motions to Dismiss [9, 10] are GRANTED in part and DENIED in part.

IV. Plaintiff’s Motion to Remand to State Court [11]

Plaintiff’s Complaint alleges claims for relief pursuant to the FDCPA, and therefore states a federal cause of action on its face. All parties that were properly served consented to the Notice of Removal. Failing to demonstrate a valid reason for remand, Plaintiff’s Motion to Remand [11] is DENIED.

V. Law Firm Defendants’ Motion Requesting an Order Commanding Plaintiff to Specify Her Service Address [13]

Plaintiff has identified two different addresses for herself in this action.

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To eliminate further confusion, Plaintiff is ORDERED to submit to the Court one address at which she may be served with all filings in this matter within 14 days of the date of this Order. The Law Firm Defendants’ Motion [13] is GRANTED.

VI. Plaintiff’s Motion to Strike and Motion for Default Judgment [15] as to the Lender Defendants

Plaintiff moves the Court to strike the Lender Defendants’ Answer [8] for failure to submit an accompanying affidavit and for entry of default judgment against the Lender Defendants. Under Georgia law, when a plaintiff files a pleading with an affidavit attached attesting to the truth of the facts stated therein, the defendant shall in like manner verify any answer. O.C.G.A. § 9-10- 111. Following the filing of the Lender Defendants’ Answer, the Law Firm Defendants removed this action to this Court. Because the affidavit requirement is a state procedural rule, it does not apply in this Court. Therefore, the Answer [8] filed without an affidavit is not deficient and will not be struck. Had the Lender Defendants failed to file a proper answer in this Court, they have nonetheless filed a timely Motion to Dismiss and therefore default judgment is not appropriate. Plaintiff’s Motion to Strike and Motion for Default Judgment [15] are DENIED.

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VI. Plaintiff’s Motion to Strike and Motion for Default Judgment [19] as to the Law Firm Defendants

The Law Firm Defendants have not yet filed an Answer to Plaintiff’s Complaint and are not required to until 14 days after the date of this Order, denying in part the Law Firm Defendants Motion to Dismiss. Plaintiff’s Motion to Strike and Motion for Default Judgment [ 19] as to the Law Firm Defendants are DENIED.

VII. Plaintiff’s Motion Requesting an Order Commanding Law Firm Defendants to Specify Their Service Address [23]

The Law Firm Defendants filed a Notice of Address for Service [24], specifying the address at which Defendants Hasty, Krueger, and S&S may be served. Therefore, Plaintiff’s Motion [23] is DENIED as moot.

Conclusion

For the aforementioned reasons: Plaintiff’s Motion for Temporary Restraining Order [2] is DENIED; Plaintiff’s Motion for Waiver of Service [3] is DENIED; the Lender Defendants’ Motion to Dismiss [9] is GRANTED in part and DENIED in part; the Law Firm Defendants Motion to Dismiss [10] is GRANTED in part and DENIED in part; Plaintiff’s Motion to Remand [1 1 ] is DENIED; the Law Firm Defendants’ Motion for Order [13] is GRANTED; Plaintiff’s Motion to Strike and Motion for Default Judgment as to the Lender

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Defendants [15] is DENIED; Plaintiff’s Motion to Strike and for Default Judgment as to the Law Firm Defendants [19] are DENIED; and Plaintiff’s Motion for Order [23] is DENIED as moot.

This case comes before the Court on Plaintiff’s Motion for Temporary Restraining Order [2] and Defendants’ Motion to Dismiss [12]. After considering the record, the Court enters the following Order.

Background

This actions arises out of Plaintiff’s failure to make payments as specified under a loan she obtained from Home America Mortgage, Inc. (“Home America”) on September 23, 2008. Plaintiff executed a promissory note (the “Note”) in favor of Home America in the amount of $189,500. Repayment of the loan was secured by Plaintiff’s property (the “Property”) located at 2629

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Pierce Brennen Court, Lawrenceville, GA 30043. The Security Deed (the “Deed”) granted by Plaintiff to MERS states that for the purpose of securing repayment of the debt set forth in the Note, “[Plaintiff] does hereby grant and convey to MERS (solely as nominee for [Home America] and [Home America’s] successors and assigns) and the successors and assigns of MERS, with power of sale,” the Property. (Dkt. [ 11-1 ] at 2). Further, the Deed states that “if necessary to comply with law or custom, MERS . . . has the right to exercise any or all of [the interests granted to MERS by the Borrower], including but not limited to, the right to foreclose and sell the Property . . . .” (Id. at 3). On April 5, 2010, MERS assigned to BAC Home Loans (“BAC”) “all its right, title and interest in and to a certain Security Deed . . . executed by Shayla LaCosta . . . to [MERS]. ” (Dkt. [16-1]).

At some unspecified time and through some unspecified means, Plaintiff allegedly contacted BAC to arrange a modification of her mortgage. (Dkt. [1] at ¶ 24). Plaintiff asserts that “[t]he parties agreed based on a representation by Defendant that Plaintiff would pay $837 a month until the modification came through.” (Id. at ¶ 25). Plaintiff contends that Defendant represented to Plaintiff that she would either secure a modification, or if she made the payment of $837 each month she would not be in default. (Id. at ¶ 26). Plaintiff

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maintains that she made the reduced $837 payment for three months, but her loan was nevertheless declared to be in default. (Id. at ¶¶ 27-28). As a result of Plaintiff’s default under the Note, the Property was scheduled to be sold at foreclosure on May 4, 2010. The foreclosure process was initiated by BAC, the loan servicer. BAC retained as counsel Defendant McCalla Raymer to carry out the foreclosure sale and McCalla Raymer in turn utilized Defendant Prommis to send out the pre-sale notice.

Plaintiff objects to the foreclosure sale on several grounds. First, Plaintiff alleges that there has been no assignment to BAC of the note originally issued to Home America. Second, Plaintiff argues that the note and mortgage are “split” because the same entity does not possess both, and therefore the mortgage is a nullity. Finally, Plaintiff argues that BAC is not a “secured creditor,” and therefore notice sent to her by BAC does not comply with Georgia law. Plaintiff’s Complaint does not limit each count to only one claim or cause of action. It appears that the Complaint alleges: (1) the tort of wrongful foreclosure against all Defendants; (2) violations of the Fair Debt Collection Practices Act (“FDCPA”) against Defendants Prommis and McCalla Raymer; (3) that Defendant BAC is vicariously liable for the violations of the FDCPA; and (4) common law fraud against BAC. The Complaint seeks

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monetary damages as well as injunctive relief to prevent a foreclosure sale of the Property.

Discussion

I.Plaintiff’s Motion for Temporary Restraining Order [2]

It is settled law in this Circuit that a temporary restraining order is an “extraordinary and drastic remedy[.]” Zardui-Quintana v. Richard, 768 F.2d 1213, 1216 (11th Cir. 1985). To obtain such relief, a movant must demonstrate:

(1) a substantial likelihood of success on the merits of the underlying case, (2) the movant will suffer irreparable harm in the absence of an injunction, (3) the harm suffered by the movant in the absence of an injunction would exceed the harm suffered by the opposing party if the injunction issued, and (4) an injunction would not disserve the public interest.

Johnson & Johnson Vision Care, Inc. v. 1-800 Contacts, Inc., 299 F.3d 1242, 1246-47 (11th Cir. 2002). For the reasons stated in Section II(B) of this Order, the Court concludes that Plaintiff has failed to make such a showing here – particularly in regards to a substantial likelihood of success on the merits of her wrongful foreclosure claim – and accordingly a temporary restraining order will not be issued. Additionally, Federal Rule of Civil Procedure 65(c) states: “The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay

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the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” Plaintiff does not deny that she has failed to make payments in accordance with the Note she signed and has made no offer to tender any security. Plaintiff’s Motion for Temporary Restraining Order [2] is DENIED.

II. Defendants’ Motion to Dismiss [12]

A.Standard for Motion to Dismiss

Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” While this pleading standard does not require “detailed factual allegations,” “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do. ” Ashcroft v. Iqbal, 556 U.S. ----, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). In order to withstand a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly, 550 U.S. at 570). A complaint is plausible on its face when the plaintiff pleads factual content necessary for the court to draw the reasonable inference that the defendant is liable for the conduct alleged. Id.

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At the motion to dismiss stage, “all-well pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff.” Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273 n.1 (11th Cir. 1999). However, the same does not apply to legal conclusions set forth in the complaint. Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009) (citing Iqbal, 129 S. Ct. at 1949). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 129 S. Ct. at 1949. The court does not need to “accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555.

B. Wrongful Foreclosure Claim

Plaintiff alleges that the proposed foreclosure sale of the Property is unlawful because: (1) the foreclosure notice does not comply with O.C.G.A. § 44-14-162.2; (2) BAC Home Loans or its counsel have not been assigned the promissory note; and (3) the note and the security deed have been “split.” (Dkt. [2] at 2). Relevant to all three arguments, is that under Georgia law, “[i]t is clear that a security deed which includes a power of sale is a contract and its provisions are controlling as to the rights of the parties thereto and their privies.” Gordon v. S. Cent. Farm Credit, ACA, 213 Ga. App. 816, 446 S.E.2d 514, 515 (Ga. Ct. App. 1994). Plaintiff granted and conveyed to MERS the

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Property with power of sale. (Dkt. [11-1] at 2). The Deed Plaintiff granted to MERS states that “if necessary to comply with law or custom, MERS . . . has the right to exercise any or all of [the interests granted to MERS by the Borrower], including but not limited to, the right to foreclose and sell the Property . . . . ” (Id. at 3). Plaintiff unequivocally granted MERS the power to sell the Property if she were not able to comply with the terms of the Note.

i. Notice of Foreclosure Sale

O.C.G.A. § 44-14-162.2 (“Section 162.2”) states that “[n]otice of the initiation of proceedings to exercise a power of sale in a mortgage, security deed, or other lien contract shall be given to the debtor by the secured creditor . . . .”1 Plaintiff asserts that the secured creditor, or owner of the loan, is the

1 O.C.G.A. § 44-14-162.2(a) in its entirety states:

Notice of the initiation of proceedings to exercise a power of sale in a mortgage, security deed, or other lien contract shall be given to the debtor by the secured creditor no later than 30 days before the date of the proposed foreclosure. Such notice shall be in writing, shall include the name, address, and telephone number of the individual or entity who shall have full authority to negotiate, amend, and modify all terms of the mortgage with the debtor, and shall be sent by registered or certified mail or statutory overnight delivery, return receipt requested, to the property address or to such other address as the debtor may designate by written notice to the secured creditor. The notice required by this Code section shall be deemed given on the official postmark day or day on which it is received for delivery by a commercial delivery firm. Nothing in this subsection shall be construed to require a secured creditor to negotiate, amend, or modify the terms of a mortgage instrument.

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Government National Mortgage Association (“Ginnie Mae”) and therefore notice of the foreclosure sale provided by BAC fails to comply with the statutory requirements. (Dkt. [ 1 ] at ¶ 6). Plaintiff argues for a very narrow interpretation of Section 162.2. According to Plaintiff’s reasoning, the Section’s requirement that notice be given “by the secured creditor” is not satisfied by the secured creditor directing its loan servicer or other authorized agent to provide pre-sale notice on its behalf. Such an interpretation of the statute is not tenable.

While not construing the Georgia statute at issue presently, the Eleventh Circuit’s decision in Greer v. O’Dell is instructive. 305 F.3d 1297, 1302 (11th Cir. 2002). The question posed to the Eleventh Circuit in that case was “whether a loan servicer is a ‘real party in interest’ with standing to conduct, through licensed counsel, the legal affairs of the investor relating to the debt that it services,” particularly “whether a loan servicer may appear in Bankruptcy Court to protect a claim relating to the debt that it services.” Id. at 1302, 1299. The Court concluded that a loan servicer does have such power. Id. at 1302. While Greer did not involve a mortgage loan, the Eleventh Circuit noted that “[o]ther courts have held in similar contexts that mortgage servicers are real parties in interest.” Id. at 1303 (citations omitted). There is nothing in Section

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162.2 to indicate that a secured creditor may not utilize an agent to serve notice on a debtor of the initiation of foreclosure proceedings.

Plaintiff argues that the plain language of the statute requires that the secured debtor alone provide the notice. Such a holding would defeat the underlying premise of agency law: that a principal has the power to appoint someone to act on his behalf. See Stallings v. Sylvania Ford-Mercury, Inc., 242 Ga. App. 731, 533 S.E.2d 731, 733 (Ga. Ct. App. 2000) (“The distinguishing characteristic of an agent is that he is vested with authority, real or ostensible, to create obligations on behalf of his principal . . . . ” (citation omitted)). Plaintiff has not drawn the Court’s attention to any instance in which the Georgia General Assembly intended that when a statute refers to a principal, that individual or entity alone must act, and may not be represented by a duly authorized agent. The Court will not assume that such an intent is manifested in Section 162.2. The purpose of Section 162.2 appears to be to regulate the form of the notice provided to a debtor prior to a foreclosure sale, requiring: that it be written; that it be provided to the debtor 30 days before the date of the proposed foreclosure; that it contain the name, address, and telephone number of the entity able to alter the terms of the mortgage; and that it be sent by registered,

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certified, or overnight mail.2 The goal of Section 162 is to give the debtor notice of the foreclosure sale. Whether that notice is provided by the secured creditor directly, or by its agent, is of no consequence.

ii.Lack of Assignment of Note to BAC

Plaintiff claims that “[t]here is no record of any assignment by Home America or MERS to BAC, such that it may institute foreclosure proceedings against the Property.” (Dkt. [ 1 ] at ¶ 12). Plaintiff does not direct the Court’s attention to any Georgia statute or decision that requires that the Note be legally transferred to the entity carrying out the foreclosure sale, if that entity is in possession of the security deed to the property. Plaintiff does cite Professor

2 The reliance of both Plaintiff and Defendants on cases interpreting O.C.G.A. § 44-14-161 (“Section 161”), as instructive on the interpretation of Section 162.2, is misplaced. Section 161 sets forth the requirements for seeking approval of a foreclosure sale. Section 161 is in derogation of the common law, which required no such judicial confirmation prior to seeking a deficiency judgment. The parties have not identified any cases that assert that Section 162 is in derogation of the common law, or identify why reasoning applied to interpreting Section 161 is applicable to the question of whether a secured creditor may utilize an agent to send notice of a foreclosure sale. Cases cited by the parties include Vlass v. Security Pac. Nat. Bank, 263 Ga. 296, 430 S.E.2d 732 (Ga. 1993) (holding that a confirmation proceeding is not a civil action such that the civil practice act applies) and Ameribank, N.A. v.Quattlebaum, 269 Ga. 857, 505 S.E.2d 476 (Ga. 1998) (holding notice of confirmation hearing must be given to debtor by the Court as directed by statute, not the creditor, based on the concern that notice by creditor may dissuade the debtor from availing himself of the protection of Section 161). The fairness concern expressed by the Court in Quattlebaum, is not present in determining whether an agent may provide the notice required by Section 162.2.

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Alexander’s Treatise, Georgia Real Estate Finance and Foreclosure Law (“Treatise”), which states: “The holder of a security deed may not be able to pursue foreclosure upon the debtor’s default if that party cannot establish that it is also the holder of the note.” (Dkt. [2] at 3 (quoting Treatise at § 3.7(b) (emphasis added))).

Professor Alexander cites the case of Sammons v. Nabers, 184 Ga. 269, 191 S.E. 124 (Ga. 1937), for this proposition. In Sammons, the note and security deed were originally given by the debtor to Robert Young, whose heirs purported to transfer it to the plaintiff in that action. The court’s decision in that case does not appear to rest on the fact that one entity possessed the note and another the security deed, but rather, that there was no evidence to “indicate under what right or claim the persons who executed this transfer undertook thereby to convey and quitclaim the property conveyed by the security deed.” Sammons, 191 S.E. at 126. The court’s concern was that the plaintiff had not demonstrated that it was in proper possession of the security deed. This Court does not read Sammons to require that an entity or individual in possession of the security deed, must also possess the note before bringing a foreclosure

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action.3

iii. “Split” of the Note and Deed

Plaintiff argues that the note and mortgage have been “split” and therefore any assignment of the Deed from MERS to BAC is a nullity. Plaintiff argues that in order for an entity to proceed with a foreclosure sale, it must possess both the promissory note and the security deed. Since MERS only possessed the Deed, the Deed is all it could transfer to BAC and because BAC did not also possess the Note, it could not foreclose on the Property. Magistrate Judge Alan J. Baverman rejected this argument in a Report and Recommendation adopted by Judge Julie E. Carnes. See Nicholson v. OneWest Bank, No. 1:10-cv-0795-JEC/AJB, 2010 WL 2732325, at *4 (N.D. Ga. April 20, 2010) (“[T]he nominee of the lender has the ability to foreclose on a debtor’s property even if such nominee does not have a beneficial interest in the

3 Plaintiff’s reliance on Harwood v. Great Am. Mgmt. and Inv., Inc., 156 Ga. App. 22, 274 S.E.2d 5 (Ga. Ct. App. 1980), for the proposition that an entity in possession of the security deed but not the note may not bring a foreclosure action, is also misplaced. (See Dkt. [2] at 4). That case stands for the proposition that initial loan documents that stated that two partners in an association were excluded from personal liability on the loan, meant that the two were not liable for the deficiency balance after a foreclosure sale of the property. Id. at 6, 7 (“Since the trial court’s determination that the defendants were not intended to be held personally liable on the agreement is the only interpretation consistent with the clear import of every other relevant document . . . the grant of . . . summary judgment on the issue of their personal liability must be affirmed.”)

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note secured by the mortgage.”). Plaintiff in Nicholson, represented by the same counsel as Plaintiff in this case, cited the same case law as does Plaintiff here in support of the position that the splitting of the security deed and the note rendered the security deed a nullity.4 Judge Baverman stated that the cases cited by the plaintiff in Nicholson for that proposition were inapplicable to that case, noting that the cases cited by the plaintiff “all concern questions of state law in other jurisdictions besides Georgia,” and therefore “the Court fail[ed] to see the relevance of these cases to the present controversy.” Id. at *4 n.5. Similarly, Plaintiff here has failed to draw the Court’s attention to any Georgia statute or decision interpreting Georgia law that precludes the holder of the security deed from proceeding with a foreclosure sale simply because it does not also possess the promissory note.

Plaintiff’s argument is also foreclosed by the plain language of the Deed she granted to MERS, which MERS subsequently assigned to BAC. In Georgia, a security deed should be construed in favor of allowing exercise of the power of sale. Kennedy v. Gwinnett Commercial Bank, 155 Ga. App. 327,

4 Compare the cases cited by Plaintiff in Section III (“The Splitting of the Note and Mortgage Rendered the Mortgage a Nullity”) of her Brief in Support of Motion for TRO, Dkt. [2] at 4-8, with the cases cited by the plaintiff in Nicholson. 2010 WL 2732325, at *4 n.5.

It is clear that a security deed which includes a power of sale is a contract and its provisions are controlling as to the rights of the parties thereto and their privies. It is likewise clear that when the grantor of a security deed grants a power of sale he does so not for his ultimate benefit but, rather, for the benefit of the grantee. “The power of sale in a mortgage simply gives to the (mortgagee) a remedy for the collection of his debt in a summary way. The presence of such a power in the mortgage simply evidences an agreement between the parties that the (mortgagee) shall be relieved from the necessity of resorting to a foreclosure at law or in equity. That portion of the mortgage containing the power, like all other contracts, is to be construed so as to effectuate the intention of the parties, and the power must be exercised in accordance with the intention of the parties as indicated in the clause in the mortgage conferring the power. The power is conferred for the purpose of enabling the mortgagee to collect his debt.”

Id. (citation omitted). The plain language of the Deed granted by Plaintiff to MERS recognizes that the Note is held by the “Lender,” but nonetheless expressly grants MERS and its assigns “the right to foreclose and sell the Property.” (Dkt. [11-1] at 3). The deed discloses no intent on the part of Plaintiff to restrict MERS or its assigns from selling the property if the Note and Deed were not in the possession of the same entity.

Plaintiff’s Complaint fails to assert a claim for wrongful foreclosure that is plausible on its face. Therefore, Plaintiffs’ wrongful foreclosure claim is

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DISMISSED.

C. FDCPA Claim

Plaintiff claims that “[t]he actions of Defendants Prommis and McCalla are in violation of the FDCPA in that each Defendant failed to properly send notice of the foreclosure, failed to advertise properly and foreclosed when neither the attorneys representing them nor BAC had the right to do so. ” (Dkt. [1] at ¶ 14). As discussed above in Section II(B)(i) the notice of foreclosure sale was proper and as discussed in Section II(B)(iii), BAC had the right to foreclose upon the Property. Therefore, the accusations underlying Plaintiff’s FDCPA claims fail. Additionally, the legislative history of 15 U.S.C. § 1692a(6), defining the term “debt collector,” “indicates conclusively that a debt collector does not include the consumer’s creditors, a mortgage servicing company, or an assignee of a debt, as long as the debt was not in default at the time it was assigned.” Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985). The Eleventh Circuit has held that the FDCPA “specifically says that a person in the business of enforcing security interests is a “debt collector” for the purposes of § 1692f(6), which reasonably suggests that such a person is not a debt collector for purposes of the other sections of the [FDCPA]. ” Warren v.

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Countrywide Home Loans, Inc., 342 Fed. Appx. 458, 460 (11th Cir. 2009). Finally, Plaintiff has not asserted a violation of Section 1692f(6) that is plausible on the face of the Complaint, because BAC had the right to foreclose on the Property. Therefore, Plaintiff’s FDCPA claims are DISMISSED.

D. Fraud Claim

Plaintiff’s fraud claim is based upon representations supposedly made by Defendant BAC concerning a modification of her mortgage. However, Plaintiff’s Complaint does not provide the requisite level of detail needed to adequately allege fraud. Federal Rule of Civil Procedure 9(b) states that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Rule 9(b) “serves an important purpose in fraud actions by alerting defendants to the precise misconduct with which they are charged and protecting defendants against spurious charges of immoral or fraudulent behavior.” Brooks v. Blue Cross and Blue Shield, 116 F.3d 1364, 1370-71 (11th Cir. 1997) (citations omitted). Rule 9(b) may be satisfied if the complaint sets forth:

(1) precisely what statements were made in what documents or oral representations or what omissions were made, and

(2) the time and place of each such statement and the person responsible for making . . . same, and

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(3) the content of such statement and the manner in which they misled the plaintiff, and

(4) what the defendants “obtained as a consequence of the fraud. Id. at 1371 (citation omitted).

Plaintiff does not allege precisely what statements were made, whether such statements were made in writing or orally, the time and place of the relevant statements, or the person(s) responsible for making such statements. The Court will not dismiss Plaintiff’s fraud claim, but rather provide Plaintiff an opportunity to amend her Complaint to attempt to allege her fraud claim with the level of specificity required by Rule 9(b).

Conclusion

For the aforementioned reasons, Plaintiff’s Motion for Temporary Restraining Order [2] is DENIED. Defendants’ Motion to Dismiss [ 12] is GRANTED as to Plaintiff’s wrongful foreclosure and FDCPA claims and DENIED, without prejudice, as to Plaintiff’s fraud claim. Plaintiff may attempt to amend her Complaint within 14 days of the entry of this Order to reassert her fraud claim with the required level of specificity. Failure to amend the fraud claim within this 14-day period will result in a dismissal of the claim.

2 comments:

Anonymous
said...

Edit to the comment above:

To be clear, the post is a parody and should not, under any circumstances, be taken seriously. The Georgia code and Federal Bench Book states nothing even remotely similar to the quotes I attributed to it above.

As I read these cases more and more...I find that MERS's right to assign/transfer the Note does not really matter either way. I have found the way to crush them on EITHER side. No one READS the contract. If MERS is the "nominee" for the lender on both the Deed AND the Note...LET THEM BE! They are liable to PERFORM under the "OBLIGATIONS" clause. While the judge in this case said that the "transfer" of the deed to secure debt is sufficient, no one argued "FOR VALUE RECEIVED..." If no VALUE or CONSIDERATION can ever be proven to have been given or received...(hint hint). Remember, if you want to "WEAR THE SHOES" MERS, you better be able to wear BOTH shoes. (Evil Grin!)

Further, why does no one USE a "NOAADP?" The QWR crap is useless. That only works for SERVICERS and only attacks accounting, and service of the loan. That's worthless. Remember...this is about a CONTRACT! Perhaps the fact that the contract requires "concurrent performance of both parties...and if one REFUSES or REPUDIATES...it discharges the other party's obligation...(hint hint!) Again...if MERS wants to play like a lender...LET THEM!

Thank you to those Judges who just ruled FOR them...little do you know...YOU JUST KILLED THEM FOR ME.